Consumer sentiment suffers setback
The IIB Bank/ESRI Consumer Sentiment Index was 64.5 in January, which is slightly up on 63.8 in December but well off the figure of 91.7 in January 2001.
Commenting on the latest figures released yesterday, IIB Bank chief economist Austin Hughes said the fairest assessment of the January data is to say that sentiment held broadly steady over December.
“In previous years, bargain-hunting in Christmas sales alongside a focus on holidays and new car purchases has tended to make Irish consumers more optimistic about making major purchases each January.
“The ECB’s rate cut just before Christmas may also have boosted last month’s reading.
“Unfortunately, in previous years this optimism has tended to fade in subsequent months,” he said.
In a commentary on the Index by IIB Bank and the ESRI, they said it should also remember that the threat of war in the Middle East could be a source of significant downside risk to this index and to the broader economy in the next couple of months.
“It seems unlikely that the economic consequences of any conflict will be geographically contained. So, the Irish Consumer Sentiment Index and the broader Irish economy could be vulnerable in coming months,” the commentary said.
However, the authors took heart from the index in comparison to other countries.
“Typical of the former were French figures released yesterday, which showed consumer confidence slipping to a five-year low, driven by worries about the employment outlook.
“The comparative resilience of the Irish Sentiment data may be explained by a combination of factors.
“First of all, there has been a consistent and orderly easing in sentiment since the peak of the boom. Forward-looking Irish households have been scaling back their spending patterns accordingly in the interim.
"So, in aggregate, Irish consumers are neither surprised by nor particularly vulnerable to the current economic slowdown.
"Their preparedness and the fundamental gains of the boom period continue to offer a measure of support to the outlook for the Irish economy,” they added.
The survey also discovered that broadly speaking, last December’s budget was slightly more severe than Irish consumers had anticipated.
“Slightly fewer, 7.9% against 10.7%, felt better off in the wake of the budget with a comparable rise, 5.7% to 8.5%, in numbers feeling considerably worse off than they had expected in the wake of the measures announced by Mr McCreevy.”
